April 2024 Commentary
Market Overview
According to the U.S. Bureau of Labor Statistics, CPI increased 0.4% in March, the same increase as in February. Over the past 12 months, inflation in the U.S. reached 3.5%, a 0.3% increase when compared to last month, driven by shelter and gasoline. The FOMC statement released on May 1, 2024, emphasized the decision to maintain the target range for the federal funds rate at 5.25%-5.5%, quoting persistent inflation above the 2% target. The Fed also decided that starting June 1, 2024, the cap on Treasury securities monthly redemptions will be lowered from the current USD 60 billion to USD 25 billion. The implications of this move put a slight downward pressure on bond yields while also providing market liquidity.
The overnight repo rate, a measure of market liquidity, ranged between 5.31%-5.35%. On the equities side, the S&P 500® was down 4.16% in April, with all sectors in the red with the exception of Utilities, which was up 1.65%. The biggest drop in the index was the Real Estate sector, down 8.50%.
Moving on to Latin America, Mexico’s inflation rate accelerated in the first two weeks of April to 4.63% from 4.48% the previous month. According to the World Economic Outlook published by the IMF, Mexico’s expected GDP was revised down to 2.4% for 2024 due to weaker-than-expected economic factors, particularly the contraction seen in the manufacturing industry in early 2024. Brazil, Latin America’s largest economy, had its expected GDP growth reduced to 2.2% in 2024 due to tight monetary policy, fiscal consolidation and weakness in the agriculture sector. Argentina’s GDP projection was also negative, at -2.6% in 2024, with an expected inflation rate for the year of 249.8%. A more positive outlook is expected in 2025, after Milei’s reforms are fully implemented. Overall, growth in the Latin American and Caribbean regions is expected to slow down in 2024.
In the eurozone, annual inflation is expected to remain at 2.4% according to a EuroStat press release on April 30, 2024. According to market analysts, this added to the argument of keeping the ECB interest rates unchanged for the next upcoming meeting. Moving to Asia, similar to last month, the HSBC India Manufacturing PMI was at a record high in April 2024, partially influenced by an overall global move away from China. Although falling from 59.1 to 58.8 in April, this represented the second-best improvement in three and a half years. The manufacturing PMI readings were fueled by strong demand in raw materials, better operating conditions and higher demand for goods.
